Mineweb: SNL points to drastic fall in new gold discoveries

SNL Metals & Mining['s] ... latest major report is titled Strategies for Gold Reserves Replacement and points to some hugely significant data which will affect global newly mined gold production way into the future....

The report points out that over the past 24 years mining companies have discovered some 1.66 billion ounces of gold in 217 major discoveries, BUT – and it’s a big BUT – while this may sound a huge amount, over the same period the industry has actually produced 1.84 billion ounces of gold, so discoveries have not been keeping pace with production. But the report goes much further in showing that the number of significant discoveries (defined as deposits with a minimum of 2 million ounces of contained gold) is diminishing and this diminishing trend seems to be accelerating. In the 1990s some 124 deposits containing 1.1 billion ounces of gold were discovered while since the year 2000 this has fallen to only 605 million ounces in 93 such discovered deposits. And most recently significant new discoveries appear to have slowed to a trickle.

Further, the report notes that the amount of potential production from these major discoveries is particularly concerning when looking at the discoveries made in the past 15 years. Assuming a 75% rate for converting resources to economic reserves and a 90% recovery rate during ore processing, the 674 million ounces of gold discovered since 1999 could eventually replace just 50% of the gold produced during the same period.

Furthermore, many of these deposits face significant political, environmental or economic hurdles, so, together with only perhaps a 75% conversion rate for resources to reserves and a possibly optimistic 90% metallurgical recovery rate, the amount of gold becoming available for production in the near term almost certainly well under 50% of that currently being produced.
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The above chart demonstrates this shortfall in discoveries very well and shows that despite the big rise in gold price so far this century the amount of new gold discovered over the same period has dropped off dramatically over the past few years.

And the problem doesn’t end here. It is also nowadays taking far longer to bring a new deposit from discovery through to production. SNL estimates that the 63 projects now in the pipeline and scheduled to begin production between 2014 and 2019 are expected to take a weighted-average 19.5 years from the date of discovery to first production. The trend is also getting worse.
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As it can take several years of exploration for a new discovery to be defined, it is too early to tell whether any surge in discovery-oriented exploration since 2010 has moderated the downward trend in the number and richness of new discoveries. SNL thus reckons that the tough financial environment for junior explorers over the past two years suggests that the longer-term downward trend in discoveries will likely continue for at least the next few years.